Report: Apple to stop using Samsung-made chips beginning in 2014

The WSJ reports that a long-anticipated move to TSMC will start next year.

For as long as Apple has shipped iPhones, iPads, and other iOS-based devices, its mobile processors have been manufactured by one company: Samsung. That may be set to change next year according to the Wall Street Journal, which reports that Apple has signed a manufacturing agreement this month with Taiwan Semiconductor (TSMC). Apple has reportedly been working to reduce its reliance on Samsung for iPhone and iPad parts, which is easy to believe given the companies' competitive and legal clashes.

TSMC executives say that the company's chips will begin shipping in Apple's devices in 2014. However, Samsung will remain "the primary supplier through next year," meaning that the iPhone and iPad refreshes expected in the fall of 2013 will continue to use Samsung-manufactured SoCs. The TSMC-made processors will be manufactured on the company's 20nm process, which will save power compared to both the 32nm Samsung process used in most current Apple A5 and A6-series chips and the 28nm process that TSMC is using for most of the mobile chips it makes today.

Rumors about an Apple-TSMC partnership have been making the rounds for years, and the report states that the delays were due to unspecified "glitches" that kept TSMC's chips from attaining the speeds and power consumption levels that Apple wanted. Talks were also apparently set back when Apple asked TSMC to set aside some of its manufacturing capacity exclusively for Apple chips, something that TSMC was unwilling to do.

TSMC manufactures a wide variety of chips for other major companies, including AMD, Nvidia, and Qualcomm.

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Now let's see how long it takes till tmsc makes something competing with apple and needs to be switched. Although they seem to be worth around 20b apple could just buy them. Then they would finally be completely vertically integrated.

TSMC is a Foundary.They make chips for other people. There isn't a competing product in terms of a finished hardware solution.

Yeah sounds like a good choice. Although stuff like that can change. Acer and Co. Also started out as contract manufacturers for the likes of dell etc. But yeah at the moment it should be pretty safe.

I don't think you understand. TSMC is a foundry. They only etch silicon wafers into chips according to customer specifications. They are so good at this that they are the world's biggest foundry. Other companies come up with a chip design and TSMC manufactures it.They were the world's first dedicated foundry (i.e. they don't design any chips or sell any of their own chips) and they're the largest. They make the GPUs for Nvidia, ATI/AMD, various chips for Marvell and Qualcomm, and almost all the ARM SoCs that aren't manufactured by Samsung. Even Intel outsources production to them on occasion. They don't design anything themselves. This chip-making thing is pretty much their entire, extremely lucrative, business. They have no reason to switch away from that.

They are never going to turn into an Apple competitor on any level because they are in an entirely different business: they fabricate chips for other people. Apple will never do that. Samsung is a special case because, like Intel, they design AND MANUFACTURE their own silicon chips that go into their own products. Unlike Intel they also make the things consumers buy (phones, tablets, etc.) instead of just the parts for those things. They also license their designs and sell their foundry services, which is why Apple was doing business with them. Samsung was competing with Apple from the beginning, while making Apple's chips.

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It will be interesting to see how the companies deal with each other when they aren't doing a lot of business together, as opposed to how pleasant they were to each other when they were doing a lot if business together.

Samsung Mobile hasn't really showed all THAT much reliance on Samsung Semi - they have had NO qualms about using Qualcomm TSMC manufactured products. But this is also typical of other Korean conglomerates vs let's say Sony, which has always preferred as much other Sony stuff as possible.

I think TSMC is still only a stopgap at best, as the leader in the field is still Intel. Apple's high demands for perf/watt will likely force it to make deals with Intel, whose process shrinks are becoming increasingly expensive without an expanding market to absorb the costs.

Found an interesting quote from a Reuters article earlier:

Quote:

"If there was a great customer that we had a great relationship with laptops and other mobile devices, and they said look, we'd really love you to build our ARM-based product, we'd consider it. It depends on how strategic they are," [Intel CEO] Krzanich said.

It will be interesting to see how the companies deal with each other when they aren't doing a lot of business together, as opposed to how pleasant they were to each other when they were doing a lot if business together.

Give the 'how pleasant they were' baseline, I'm pretty sure that we can expect some sort of corpronational cyberpunk dirty war. Should be pretty neat.

I think TSMC is still only a stopgap at best, as the leader in the field is still Intel. Apple's high demands for perf/watt will likely force it to make deals with Intel, whose process shrinks are becoming increasingly expensive without an expanding market to absorb the costs.

Found an interesting quote from a Reuters article earlier:

Quote:

"If there was a great customer that we had a great relationship with laptops and other mobile devices, and they said look, we'd really love you to build our ARM-based product, we'd consider it. It depends on how strategic they are," [Intel CEO] Krzanich said.

Recently, Ottelini said that one of the biggest mistakes he made at Intel was turning down Apple when they approached Intel about making the chips for the iPhone. he said that Apple gave a number for how much the chips would cost, and how much they were willing to pay. He said that Intel estimated the costs as being higher—too high to make a profit on, and that they believed that Apple wouldn't need enough chips anyway.

It turned out that the chips would have cost less than Intel had estimated, and that Apple needed far more than Intel estimated.

I wonder why, with all those admissions, they didn't go back to Apple and offer to make chips for them after all. I think that most Apple users, and Intel watchers, would prefer if they and Apple had linked up for mobile as well. Geeze, Apple will need 300 million chips this year, and 400 million next year, at an average of $15 per SoC for Apple, that's $4.5 billion this year, and $6 billion next year. Even Intel will miss that amount.

Oh apparently it was the precursor to the atoms. Yeah sure. Most likely apple approached them early in the design process. No chance that this thing would have had a realistic chance of being used. Atom wasn't even remotely usable in something like a phone back then. Sounds like a case of ceo telling embellished stories because they like the sound of their own voice.

Samsung Mobile hasn't really showed all THAT much reliance on Samsung Semi - they have had NO qualms about using Qualcomm TSMC manufactured products. But this is also typical of other Korean conglomerates vs let's say Sony, which has always preferred as much other Sony stuff as possible.

When it comes to doing US-release models, Qualcomm is a very, very, serious player if you want contemporary RF silicon for the flavors and frequencies used in the US embedded in your SoC. They have a pretty long series of design wins for handsets where the US model is Qualcomm cored, while the 'world' model is handled by some other SoC.

I think TSMC is still only a stopgap at best, as the leader in the field is still Intel. Apple's high demands for perf/watt will likely force it to make deals with Intel, whose process shrinks are becoming increasingly expensive without an expanding market to absorb the costs.

Found an interesting quote from a Reuters article earlier:

Quote:

"If there was a great customer that we had a great relationship with laptops and other mobile devices, and they said look, we'd really love you to build our ARM-based product, we'd consider it. It depends on how strategic they are," [Intel CEO] Krzanich said.

Recently, Ottelini said that one of the biggest mistakes he made at Intel was turning down Apple when they approached Intel about making the chips for the iPhone. he said that Apple gave a number for how much the chips would cost, and how much they were willing to pay. He said that Intel estimated the costs as being higher—too high to make a profit on, and that they believed that Apple wouldn't need enough chips anyway.

It turned out that the chips would have cost less than Intel had estimated, and that Apple needed far more than Intel estimated.

I wonder why, with all those admissions, they didn't go back to Apple and offer to make chips for them after all. I think that most Apple users, and Intel watchers, would prefer if they and Apple had linked up for mobile as well. Geeze, Apple will need 300 million chips this year, and 400 million next year, at an average of $15 per SoC for Apple, that's $4.5 billion this year, and $6 billion next year. Even Intel will miss that amount.

Sounds like bullshit to me. Intel didn't have a chip you could put in a phone until 2012 (11 if I am nice) how would they have created one in 2006? Magic? Time travel?

Intel didn't have an x86 design you could put in a phone until quite recently. The deal mentioned was that Intel would manufacture, on their quite superior fab process, essentially the same core that Apple is currently buying from Samsung, and will be buying from TSMC.

Given that Intel usually doesn't do that, the money must have been fairly tempting for them to have considered it.

Now let's see how long it takes till tmsc makes something competing with apple and needs to be switched. Although they seem to be worth around 20b apple could just buy them. Then they would finally be completely vertically integrated.

TSMC is a Foundary.

They make chips for other people. There isn't a competing product in terms of a finished hardware solution.

I cant find the link to WSJ report? Is it based on the same report from Digitimes?

Edit: The WSJ site doesn't provide any official Link. So this is more of a educated rumors. Although we are pretty much 99.99% sure it is a done deal deal already.

Another guess would be in the next 2 - 3 months, GS4 sales number aren't doing so well will be heavily reported, as well as how Apple stop using Samsung Semi will impact their bottom line revenue, and then stocks prices take a dip. And you may guess who will be earning some more money in the move.

Now let's see how long it takes till tmsc makes something competing with apple and needs to be switched. Although they seem to be worth around 20b apple could just buy them. Then they would finally be completely vertically integrated.

TSMC is a Foundary.

They make chips for other people. There isn't a competing product in terms of a finished hardware solution.

Yeah sounds like a good choice. Although stuff like that can change. Acer and Co. Also started out as contract manufacturers for the likes of dell etc. But yeah at the moment it should be pretty safe.

I wonder if Apple has put much of its own cash into TSMC's 20nm process and, if so, how much.Last year the news was that TSMC's 20nm was crap. This year, it's supposedly ahead of schedule and ready to go, etc. etc.

I cant find the link to WSJ report? Is it based on the same report from Digitimes?

Edit: The WSJ site doesn't provide any official Link. So this is more of a educated rumors. Although we are pretty much 99.99% sure it is a done deal deal already.

Another guess would be in the next 2 - 3 months, GS4 sales number aren't doing so well will be heavily reported, as well as how Apple stop using Samsung Semi will impact their bottom line revenue, and then stocks prices take a dip. And you may guess who will be earning some more money in the move.

WSJ report is linked in the first paragraph, click "reports." I know there's a DigiTimes rumor from a few days ago, but I ignored it as I do all DigiTimes reports - historically outlets like the WSJ have a much better track record (also note that the report cites TSMC executives and not the more nebulous "sources familiar with the matter").

Now let's see how long it takes till tmsc makes something competing with apple and needs to be switched. Although they seem to be worth around 20b apple could just buy them. Then they would finally be completely vertically integrated.

TSMC is a Foundary.They make chips for other people. There isn't a competing product in terms of a finished hardware solution.

Yeah sounds like a good choice. Although stuff like that can change. Acer and Co. Also started out as contract manufacturers for the likes of dell etc. But yeah at the moment it should be pretty safe.

I don't think you understand. TSMC is a foundry. They only etch silicon wafers into chips according to customer specifications. They are so good at this that they are the world's biggest foundry. Other companies come up with a chip design and TSMC manufactures it.They were the world's first dedicated foundry (i.e. they don't design any chips or sell any of their own chips) and they're the largest. They make the GPUs for Nvidia, ATI/AMD, various chips for Marvell and Qualcomm, and almost all the ARM SoCs that aren't manufactured by Samsung. Even Intel outsources production to them on occasion. They don't design anything themselves. This chip-making thing is pretty much their entire, extremely lucrative, business. They have no reason to switch away from that.

They are never going to turn into an Apple competitor on any level because they are in an entirely different business: they fabricate chips for other people. Apple will never do that. Samsung is a special case because, like Intel, they design AND MANUFACTURE their own silicon chips that go into their own products. Unlike Intel they also make the things consumers buy (phones, tablets, etc.) instead of just the parts for those things. They also license their designs and sell their foundry services, which is why Apple was doing business with them. Samsung was competing with Apple from the beginning, while making Apple's chips.

Samsung Mobile hasn't really showed all THAT much reliance on Samsung Semi - they have had NO qualms about using Qualcomm TSMC manufactured products. But this is also typical of other Korean conglomerates vs let's say Sony, which has always preferred as much other Sony stuff as possible.

One reason usually given for that is because Apple subsumes so much of their capacity that they can't always produce enough chips for themselves. It will be interesting to see how it changes as Apple winds down orders over the next few years.

I don't disagree. But things change esp. If a company is a 20 billion dollar company like tmsc. When you get bigger you try to go into other markets. And in the electronic world that seems to mean being more vertically integrated over time. Foundry today, chip designer tomorrow.

It usually happens in reverse.

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Didn't say it's likely. Not sure it's worth all the text.

I'm trying to drive home just how very unlikely it is. TSMC is so secure they don't have any need to branch out. The electronics market is low-margin on the side of device sellers, but they all need chips and TSMC is the place they go, big or small, to get them. It makes zero sense for them to do anything other than keep taking all that business.

I think you are simply wrong. The article I found said it was the precursor to the atom they inquired about. Which would have been found unusable by Apple engineers pretty early in the evaluation process.

I don't disagree. But things change esp. If a company is a 20 billion dollar company like tmsc. When you get bigger you try to go into other markets. And in the electronic world that seems to mean being more vertically integrated over time. Foundry today, chip designer tomorrow.

It usually happens in reverse.

Quote:

Didn't say it's likely. Not sure it's worth all the text.

I'm trying to drive home just how very unlikely it is. TSMC is so secure they don't have any need to branch out. The electronics market is low-margin on the side of device sellers, but they all need chips and TSMC is the place they go, big or small, to get them. It makes zero sense for them to do anything other than keep taking all that business.

I don't disagree with the unlikely. But it usually happens in reverse? Don't think that is true. Over time companies normally go upmarket. I. E taiwanese companies start out making parts then start making complete computers for other companies and finally under their own brand. That's exactly the direction it usually goes. Apple bringing low level stuff like chip development in house is the exception of the rule.

Has Samsung announced a move to 20nm? I can't find anything on Google other than a mention of them hoping to actually accomplish it sometime in the future, and that was from last year.

It's interesting to see manufacturing process become the bottleneck for the multi billion dollar consumer electronic construction pipeline. With Samsung apparently officially falling behind, yet to unveil a successor to their 32nm process, there's only two silicon manufacturers left in the entire world (that I know of) that will be willing and able to build processors on the latest, smallest manufacturing process while letting other companies actually use such processes. That looks like a potentially strangling bottleneck if anything happens to either TSMC or Global Foundries.

Has Samsung announced a move to 20nm? I can't find anything on Google other than a mention of them hoping to actually accomplish it sometime in the future, and that was from last year.

It's interesting to see manufacturing process become the bottleneck for the multi billion dollar consumer electronic construction pipeline. With Samsung apparently officially falling behind, yet to unveil a successor to their 32nm process, there's only two silicon manufacturers left in the entire world (that I know of) that will be willing and able to build processors on the latest, smallest manufacturing process while letting other companies actually use such processes. That looks like a potentially strangling bottleneck if anything happens to either TSMC or Global Foundries.

Sure, manufacturing memory chips and CPU chips are two very different things but Samsung is indisputably one of the leaders in semiconductor tech. Their capital expenditures on FABs is second only to Intel.

I'm having a hard time imagining that Intel is seriously considering taking over fabricating Apple processors...Maybe, and a big one at that, once they've moved their first lines to 14nm and they start making Atom a first-class citizen, they might have some capacity at a second line 22nm fab for Apple. As I recall, Intel's usual modus operandi as they upgrade is to kick the lower-end processors (Atom, Pentium, etc) and their chipsets to the second line fabs that are a node or so behind.

Intel's been at this a long, long time and have a very good handle on managing capacity. Given how expensive building/upgrading fabs is, they have to be. I can't see two cut-throat companies like Intel and Apple coming together on this - they won't be able to come to terms on pricing or capacity, IMO. Both sides will play hardball too hard over profits, and they damn sure won't throw in together on a new fab so Apple can feel like a first-class citizen. They don't have the capacity to spare to start cranking out hundreds of millions of low-margin SOCs

To be fair, though, maybe if the x86 phone processors don't get traction the way Intel wants, and as PC shipments continue to slow (though the gloom and doom 'post-PC era' predictions are a bit overblown, I think), maybe Intel will strike a deal - better to make small profits than having a fab sit idle.

Just the same, though, I call it highly unlikely.

I will say I wish I had the money to short Samsung stock and time it right for when the market starts shitting bricks over Apple taking their ball and going home - that's going to make some people obscene amounts of money.

I don't disagree. But things change esp. If a company is a 20 billion dollar company like tmsc. When you get bigger you try to go into other markets. And in the electronic world that seems to mean being more vertically integrated over time. Foundry today, chip designer tomorrow. Phone manufacturer in the next decade who knows.

Didn't say it's likely. Not sure it's worth all the text.

TSMC has a 95 billion dollar market cap, not 20 billion. Even Intel is only 120 billion.

I don't disagree with the unlikely. But it usually happens in reverse? Don't think that is true. Over time companies normally go upmarket. I. E taiwanese companies start out making parts then start making complete computers for other companies and finally under their own brand. That's exactly the direction it usually goes. Apple bringing low level stuff like chip development in house is the exception of the rule.

TSMC will never make phones. Give me one good reason why they should? Would they spend billions to make their own OS that nobody will use, a la Blackberry? Would they give up all hope of making a profit and use Android? Only one company involved with Android, Samsung, has made any net cash off of it. Or do you think Windows Mobile is all the rage?

Intel chips may get into Apple iphones and ipads one day, but not by taking over manufacturing of Apple chips. That's the job of a foundry and TSMC is (usually) good at that. Intel will not do it for using up fab capacity. They want to see their own IP, Intel x86 cores, achieve a major market share in mobile.

I think it's a matter of one more generation. A couple of years and the mobile-targeted Intel x86 cores will be ahead of the competition on perf/power consumption. At that point, Apple will have the option to unify architectures and some of the code base across phones, tablets, macbooks, and full macs. With similar look and feel and some common features across the line. Of course, there'll be specific optimizations in hardware and software for demands of each form-factor.

If that sounds like what Microsoft has been aiming at all these years, welcome to the future where Apple is the new M$. (they already are, in some ways.)

The other area (outside power consumption) where intel lags competition in mobile is radio integration into SOC. Intel spent far too much time and money enamored with wimax. What does intel do when they stumble and fall behind? They put dogged effort into it, and usually come out far ahead of the competition. Remember what Intel did to AMD chips with the core architecture. I expect Intel to aim for a fully integrated solution for ac wifi + Bluetooth 4, and worldwide roaming for LTE including China and India (not just US and Europe). A radio solution that runs everything from cellular data to wireless displays to home automation.

Intel being Intel, they'll apply these improvements to other areas of the market. The work they are doing for a high perf/low power mobile core is relevant to the many-core massively parallel high performance computing workloads Intel is chasing at the opposite end of the compute spectrum.

One hitch: In recent years, Apple has seemed intent on keeping control of processor design in house. Of course, they also have the experience of successfully switching horses when conditions change.

Andrew Cunningham / Andrew has a B.A. in Classics from Kenyon College and has over five years of experience in IT. His work has appeared on Charge Shot!!! and AnandTech, and he records a weekly book podcast called Overdue.